RNS Number:3753N
Celsis International PLC
20 November 2001
Celsis International plc
Interim Results for the 6 months to 30 September 2001
Celsis International plc, which provides analytical services and develops and
supplies diagnostic systems, that detect and measure contamination, for the
pharmaceutical, personal care & cosmetic and food industries worldwide,
announces its interim results for the period ended 30 September 2001.
Key highlights for the period include:
* Significant progress made
* New strategy implemented, potential being delivered
* Continuing activities: revenues 13.9% ahead; H1 2001 #8.52m (2000 H1: #
7.48m)
* Profit before tax continuing activities H1 #40,000 (2000 H1: #328,000)
* H1 product sales affected by September 11th
* Cash position substantially improved
* Acquisition of Concell fully integrated
Jack Rowell, Chairman commented:
"We have made significant progress since reporting last and are beginning to
see an upward trend in our performance indicators. The first half began
positively with strong results from our Product Group and a very positive
performance from our Laboratory Group in the US. However, the second quarter
became extremely challenging with a sharp downturn in activity after the
tragic events of 11th September 2001, which affected one or our two main
shipping months. The Company normally has a second half bias but following
the sharp fall off in September this will be accentuated in the current year."
Jay LeCoque, Chief Executive stated:
"Following the restructuring and management changes last year I can
confidently state that we are starting to see the benefits of the new
operating structure, particularly in Europe. The global acceptance of our
technology and products is proven by the quality and quantity of our customer
base. The opportunity our markets present and our ability to capitalize on our
current position remain undiminished."
20th November 2001
Enquiries:
Celsis International plc Tel: 01223 426 008
Jay LeCoque, Chief Executive
College Hill Tel: 020 7457 2020
Michael Padley
Nicholas Nelson
Chairman's Statement
This has been a period of change where the new management team has implemented
the strategy previously outlined to enable the Company to deliver the
potential that Celsis has in the marketplace. We have made significant
progress since reporting last and are beginning to see an upward trend in our
performance indicators.
The first half began positively with strong results from our Products Group
and a very positive performance from our Laboratory Group in the US. However,
the second quarter became extremely challenging with a sharp downturn in
activity after the tragic events of 11th of September 2001, which affected one
of our two main shipping months. We have since faced immediate postponement of
capital spending, and a very depressed macro-economic environment. In the
immediate aftermath of the disaster a number of our major customers in the US
stopped all overseas flights and this had a significant affect on the
installation of orders. We experienced a sharp downturn in order intake and
deliveries during the last three weeks of the period under review, however we
believe these have been deferred rather than lost.
For the six month period, ended September 30, 2001 we are reporting a small
profit on revenue of #8,515,000 in the continuing activities, which is a 13.9%
increase over the comparable period last year when revenue was #7,478,000. The
Company normally has a second half bias but following the sharp fall off in
September this will be accentuated in the current year.
Chief Executive's Review
Products Division
Following the restructuring and management changes last year I can confidently
state that we are starting to see the benefits of the new operating structure,
particularly in Europe following the acquisition of Concell in March 2001.
Margins in the European dairy sector remain under pressure following the
regional competition experienced last year but the acquisition of Concell, has
enabled a cessation of price erosion and the recapture of market share
previously lost. Prices have stabilised and a combination of the state of the
art instrument, first developed by Concell, plus improved reagents developed
by teams from Celsis and Concell, form the basis of our strategy to defend and
grow the dairy business. The acquisition has also enabled the Group to solve
one of its main problems. Prior to the acquisition we were marketing
different products to different regions. Following the Concell integration we
have implemented a global strategy offering each product on a worldwide basis.
The new product range has also allowed us to leverage our worldwide
position. Returns in the European dairy businesses are still not as good as
we would like but are improving.
The Global Corporate Account Management (GCAM) programme has allowed us to
accelerate the growth within the existing client base whilst also expanding
into Asia and Latin America. Under the programme we are focused on building
relationships worldwide with major corporates in the pharmaceutical and
personal care & cosmetic industries. Our strategy has allowed us to expand
more rapidly, increase turnover and improve the access to leading corporate
accounts. We are now successfully marketing, not just on the quality of the
technology - which is not in question - but on the cost savings that the
implementation of the equipment can give. We have an excellent product and we
have a proven selling system with which to maximise its commercial potential.
Contract Laboratory Services Group
The business goes from strength to strength and has maintained its excellent
growth rate. Margins have improved and with the enhancement of its services
we expect this to continue. We are exploiting our niche strategy in a growing
market and we expect to benefit from the trend in outsourcing by both
Pharmaceutical and Personal Care Companies. We are maintaining the improved
level of customer service and the additional capital expenditure has allowed
us to further increase the capacity to meet demand. CLG continues to be a
solid, growing cash contributor to the Celsis Group with an overall improving
performance.
Disposal/Closure
During the period the Company disposed of the Hygiene Monitoring business that
had turnover of #300,000 per annum and was loss making. Over the next 3 years
we will receive a royalty, based on sales. However, there will be a write-off
associated with this disposal as described in the financial review.
We have also discontinued our Brazilian operation due to revised import
restrictions placed on capital equipment by the Brazilian Government. However,
we remain committed to the growth of our activities in Brazil and throughout
Latin America.
Financial Review
We have changed the revenue recognition policy, as previously stated, and
despite the shortfall in September the Company recorded an operating profit.
Gross profit increased 9% and due to variation in the products and services
mix, our gross margin decreased slightly to 60% from 62% last year.
This is due to sales and marketing expenses on continuing operations having
increased by 14% on an annual basis, as each of the four geographic regions
are now headed by a profit centre manager. We have also invested in marketing
and promotional activities following the integration of the Concell products
together with training of our sales force and the rationalisation of the two
distribution channels, markets and general corporate branding.
R & D and administrative expenses have increased 2% from #1,364,000 to #
1,395,000, and previous periods costs analysis have been restated to reflect
the current breakdown of costs between sales and marketing, R & D and
administrative, to allow for easier comparison.
Inventory has been reduced from #2,829,000 a year ago to #2,021,000 this year
and debtors have decreased by 17.5 % during the last 6 months. This is a
reflection of the continuous efforts to improve cashflow and reduce working
capital. Cash and cash equivalents improved, as of Sept 30, 2000. The cash
inflow from operating activities has improved by #1,275,000 compared to the
same period last year; moving from an outflow of #1,093,000 to a positive
inflow of #182,000.
We shall continue our efforts to control our receivables position, and have
recently reviewed the credit terms given to our distributor network
Investment in our Divisions has continued, particularly in the Laboratory
Group to meet an increased demand for our testing services requiring state of
the art instrumentation and equipment, and our capital spent during the first
six months of this year is up from #274,000 to #415,000. This expenditure
will allow the Laboratory Group to maintain and further develop its
competitive and qualitative edge in the next year.
We believe that our current cash position, line of credit, investment
requirements and existing commitments will satisfy our expected working
capital needs throughout the present fiscal year. The Company has no long
term borrowings and has substantially reduced its short term liabilities
during the 6 months under review from #4,510,000 to #3,681,000 at the end of
September 2001.
Disposal/Closure
On Sept 26, 2001 we signed an agreement with Hygiena LLC to dispose of all the
assets of our Hygiene Monitoring Division.We also filed the articles of
dissolution of our Brazilian Subsidiary Celsis Ltda at the Rio de Janeiro
Trade Register at the end of September 2001. Discontinuing our Hygiene
Monitoring activities and the activities of our Brazilian subsidiary has led
us to restructure our operating divisions and R & D department.
This reorganisation has had a material effect on the nature and focus of the
Group's operations and as such has been classified as non-operating
exceptional items in accordance with FRS3. During the period under review we
recorded #1,543,000 of restructuring costs and special charges including
accruals for stock obsolescence of #257,000, debt write-offs of #221,000 and
other receivables write-offs of #724,000.
As a result of this restructuring program, we expect pre-tax savings in
operating expenses to be slightly more than #600,000 on an annualised basis.
Our net operating result on continuing operations for the 6 months period
shows a profit of #56,000 and an operating loss after inclusion of the
discontinued operations of #252,000.
As there are corporation tax losses within the Group, there is no tax
attributable to exceptional items. The net profit after interest and tax is #
40,000 for the 6 month period but after inclusion of the discontinued
operations and the exceptional items related to the discontinued operations
leads to a net loss after interest and tax of #1,811,000.
Summary
We continue to make significant progress and are now cash generative,
profitable at the operating level with an improving gross margin and we have
the potential to significantly expand our operations. The global acceptance of
our technology and products is proven by the quality and quantity of our
customer base. The opportunity our markets present and our ability to
capitalize on our current position remain undiminished and in its first year
this management team has proven that it can react quickly and confidently to
changing market conditions so that Celsis remains the supplier of choice to
the Pharmaceutical, Personal Care and Dairy manufacturers across the world.
Unaudited Consolidated Profit and Loss Account
for the six month period ended 30.09.2001
Dis- Dis-
Continuing continuing Continuing continuing
operations operations Total opeartions operations Total
Un- Un-
audited audited Total
Six Six Six Six Six Six Audited
months months months months months months Year
to to to to to to to
30 30 30 30 30 30 31
Sept Sept Sept Sept Sept Sept March
2001 2001 2001 2000 2000 2000 2001
#'000 #'000 #'000 #'000 #'000 #'000 #'000
restated
Notes
Turnover 8,515 150 8,665 7,478 145 7,623 17,509
Cost of (3,383) (100)(3,483) (2,778) (91) (2,869) (5,800)
Sales
Gross 5,132 50 5,182 4,700 54 4,754 11,709
profit
Overheads
Sales & (3,725) (314)(4,039) (2,603) (355) (2,958) (7,022)
marketing
expenses
Administrative (983) (983) (974) (974) (1,998)
expenses
Research & (368) (44) (412) (390) (390) (787)
development
expenditure
Operating 56 (308) (252) 733 (301) 432 1,902
profit/(loss)
Exceptional - (1,543)(1,543) (397) - (397) (924)
items
Profit/(loss) 56 (1,851)(1,795) 336 (301) 35 978
before
interest
Interest 58 - 58 31 - 31 290
receivable
& similar
income
Interest (74) - (74) (39) - (39) (189)
payable
Profit/(loss) 40 (1,851)(1,811) 328 (301) 27 1,079
before
taxation
Taxation - - - 95 - 95 (147)
Retained 40 (1,851)(1,811) 423 (301) 122 932
profit/(loss)
for the period
Earnings
per
Ordinary
Share
Before 0.05p (0.29p) (0.24p) 0.71p (0.29p) 0.42p 1.80p
exceptional
costs
Exceptional - (1.50p) (1.50p) (0.39p) - (0.39p)(0.90p
costs
Earnings 1 0.05p (1.79p) (1.74p) 0.32p (0.29p) 0.03p 0.90p
per
Ordinary
Share
IIMR 0.05p (1.79p) (1.74p) 0.32p (0.29p) 0.03p 0.90p
earnings
per
Ordinary
Share
Diluted 1 0.05p (1.79p) (1.74p) 0.32p (0.29p) 0.03p 0.90p
earnings
per share
Statement of total recognised gains and losses
Total Total Total
Unaudited Unaudited Audited
Six months Six months Year to
to 30 Sept to 30 Sept 31 March
2001 2000 2001
#'000 #'000 #'000
(Loss)/(profit) for the financial (1,811) 122 932
period
Currency translation (273) 577 504
differences on foreign
currency net investments
Prior year adjustment (3,312) (3,312)
Total (losses)/profit recognised (2,084) (2,613) (1,876)
since last annual report
Unaudited Consolidated Balance Sheet
at 30 September 2001
At 30 Sept At 30 Sept At 31 March
2001 2000 2001
#'000 #'000 #'000
Notes Unaudited restated Audited
Fixed Assets
Intangible assets 1,312 401 1,321
Tangible assets 3,298 4,189 3,372
Investments 5 13 5
4,615 4,603 4,698
Current Assets
Stocks 2,021 2,829 2,556
Debtors : amounts falling due after one year 530 703 614
Debtors : amounts falling due within one 6,766 6,762 8,230
year
Cash at bank and in hand 843 299 1,590
10,160 10,593 12,990
Creditors - due within one year (3,382) (2,916) (4,183)
Net Current Assets 6,778 7,677 8,807
Total Assets less Current Liabilities 11,393 12,280 13,505
Creditors - due after more than one year (299) (452) (327)
Net Assets 11,094 11,828 13,178
Capital and Reserves:
Called up share capital 1,071 1,032 1,071
Share premium account 6 14,564 13,990 14,564
Profit and loss account 5 (5,582) (4,235) (3,498)
Reserve arising on consolidation 1,041 1,041 1,041
Equity shareholders' funds 11,094 11,828 13,178
Unaudited Cashflow Statement
for the six month period ended 30 September 2001
Six Six Year
months months
to 30 to 30 to 31
Sept Sept March
2001 2000 2001
#'000 #'000 #'000
Unaudited restated Audited
Net cash inflow/(outflow) from operating activities
Net cash inflow/(outflow) before exceptional costs 1,725 (1,093) 1,604
Outflows related to exceptional costs (1,543) - (924)
Net cash (outflow)/inflow from operating activities 177 (1,093) 680
Returns on investments and servicing of finance
Interest received 59 31 259
Interest paid (54) (39) (189)
Net cash inflow/(outflow) from returns on 5 (8) 70
investments and servicing of finance
Taxation
Corporation tax paid - (91) (47)
- (91) (47)
Capital expenditure and financial investment
Purchase of tangible fixed assets (415) (274) (849)
Sale of tangible fixed assets - 1,219
Purchase of intangible fixed assets - (20)
Net cash (outflow)/inflow from returns on (415) (274) 350
investment and capital expenditure
Acquisitions
Purchase of subsidiary undertaking (less cash - - (498)
acquired)
Cash (outflow)/inflow before financing (233) (1,466) 555
Financing
Issue of shares - 7 -
Proceeds from share options exercised - - 5
Repayment of principal under finance leases (5) (47) (96)
Repayment of loan principal - (10) (376)
Net cash (outflow) from financing - (50) (467)
(Decrease)/increase in cash in the period (233) (1,516) 88
Notes to the Financial Statements
for the six month period ended 30 September 2001
1. Basic & diluted (loss)/profit per Ordinary Share
Six months Six months Year
to 30 Sept to 30 Sept to 31 March
2001 2000 2001
#'000 #'000 #'000
Unaudited restated Audited
(Loss)/profit on ordinary activities (1,811) 122 932
after taxation
Basic weighted average number of Ordinary 103,226,366 103,065,415 103,226,366
Shares in issue
Diluted weighted average number of Ordinary 103,972,363 104,242,651 103,972,363
Share in issue
2. Reconciliation of operating (loss)/profit
to net cash (outflow)/inflow from operating
activities
Operating (loss)/profit before exceptional costs (252) 432 1,902
Exchange (loss)/gain 31 (411)
Depreciation of tangible fixed assets 400 447 1,073
Provision for reduction in valuation of shares
held by ESOT - 6 14
Amortisation of intangible assets 23 15 31
(Profit)/loss on disposal of tangible fixed assets 13 - (262)
(Increase)/decrease in debtors 1,417 (651) (1,197)
(Increase)/decrease in stocks 792 (278) 60
(Decrease)/increase in trade & other creditors (699) (653) (17)
Net cash inflow/(outflow) from continuing
operating activities 1,725 (1,093) 1,604
3. Reconciliation of net cash flow to
movement in net funds
(Decrease)/increase in cash in the period (233) (1,516) 88
Repayment of finance lease and loan obligations 5 57 472
Changes in net funds resulting from cashflows (228) (1,459) 560
New finance leases - - (208)
Exchange adjustment 20 406 (31)
Movement in net funds in the period (208) (1,053) 321
Net funds at the beginning of the period 343 22 22
Funds/(defecit) at the end of the period 135 (1,031) 343
Notes to the Financial Statements
Continued
4. Analysis of net funds
At start of Cashflow Non-cash Exchange At end of
period changes differences period
#'000 #'000 #'000 #'000 #'000
Six months ended 30
September 2001
Cash at bank and in 1,590 (755) - 8 843
hand
Bank overdrafts (884) 522 - - (362)
Loans - - - - -
Finance leases (363) 5 - 12 (346)
343 (228) - 20 135
Six months ended 30
September 2000
Cash at bank and in 591 (742) - 450 299
hand
Bank overdrafts - (774) - 2 (772)
Loans (348) 10 - (29) (367)
Finance leases (221) 47 - (17) (191)
22 (1,459) - 406 (1,031)
Year ended 31 March
2001
Cash at bank and in 591 971 - 28 1,590
hand
Bank overdrafts - (884) - - (884)
Loans (348) 376 - (28) -
Finance leases (221) 97 (208) (31) (363)
22 560 (208) (31) 343
5. Profit and loss account
Six months Six months Year
to 30 Sept to 30 Sept to 31 March
2001 2000 2001
#'000 #'000 #'000
Retained (loss)/profit brought forward (3,498) (1,622) (1,622)
Prior year adjustment - (3,312) (3,312)
At 1 April (restated) (3,498) (4,934) (4,934)
Retained (loss)/profit for the period (1,811) 122 932
Exchange difference (273) 577 504
Retained loss carried forward (5,582) (4,235) (3,498)
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